Avon 2005 Annual Report Download - page 30

NOTES฀TO฀CONSOLIDATED฀FINANCIAL฀STATEMENTS
In August 2005, we increased the size of our existing commercial
paper program from $600.0 to $1,000.0. Under the program,
we may issue from time to time unsecured promissory notes in
the commercial paper market in private placements exempt from
registration under federal and state securities laws, for a cumula-
tive face amount not to exceed $1,000.0 outstanding at any one
time and with maturities not exceeding 270 days from the date
of issue. The commercial paper short-term notes issued under
the program are not redeemable prior to maturity and are not
subject to voluntary prepayment. The commercial paper program
is supported by our credit facilities. Outstanding commercial paper
effectively reduces the amount available for borrowing under the
credit facility. At December 31, 2005, we had commercial paper
outstanding of $756.9 at an average annual interest rate of 3.6%.
At December 31, 2005, we were in compliance with all covenants
in our indentures. Such indentures do not contain any rating down-
grade triggers that would accelerate the maturity of our debt.
At December 31, 2005, we had an international committed line of
credit of $4.3 of which $.3 was outstanding. The fees on this line
are .25% on the unused portion and the prime rate on outstanding
amounts. At December 31, 2005 and 2004, notes payable included
short-term borrowings of international subsidiaries at average
annual interest rates of approximately 5.1% and 4.9%, respectively.
At December 31, 2005 and 2004, we also had letters of credit
outstanding totaling $24.8 and $25.0, respectively, which primarily
guarantee various insurance activities. In addition, we had outstand-
ing letters of credit for various trade activities and commercial
commitments executed in the ordinary course of business, such as
purchase orders for normal replenishment of inventory levels.
5ACCUMULATED฀OTHER฀ COMPREHENSIVE฀LOSS
Accumulated other comprehensive loss at December 31 consisted
of the following:
2005 2004
Foreign currency translation
adjustments $(359.9) $(317.0)
Unrealized gains from available-for-sale
securities, net of taxes .2 2.0
Minimum pension liability adjustment,
net of taxes (379.9) (359.8)
Net derivative losses from cash flow
hedges, net of taxes (1.3) (4.7)
Total $(740.9) $(679.5)
A fixed-income portfolio included in a grantor trust and mutual
funds that are used to make benefit payments under non-qualified
benefit plans are classified as available-for-sale and recorded at
current market value (see Note 10, Employee Benefit Plans).
The cost, gross unrealized gains and losses and market value of the
available-for-sale securities as of December 31, were as follows:
2005
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
U.S. government bonds(a) $ 3.4 $ – $ – $ 3.4
State and municipal bonds(a) 9.2 .1 (.1) 9.2
Mortgage backed securities(a) 1.5 – – 1.5
Other(a) 2.9 .1 – 3.0
Total available-for-sale
securities(b) 17.0 .2 (.1) 17.1
Grantor trust cash and
equivalents (Note 10) 34.4 – – 34.4
Total $51.4 $.2 $(.1) $51.5
(a) At December 31, 2005, investments with scheduled maturities in less than
two years totaled $3.4, two to five years totaled $1.2 and more than five
years totaled $14.7.
(b) At December 31, 2005, there were no investments with unrealized losses in
a loss position for greater than 12 months.
Payments for the purchases, proceeds and gross realized gains and
losses from the sales of these securities totaled $97.9, $97.9, $2.8
and $.4, respectively, during 2005. During 2005, we reclassified
$4.7 of unrealized gains from accumulated other comprehensive
loss to other expense, net on the sale of available-for-sale securities.
We also reclassified $2.2 of unrealized losses from accumulated
other comprehensive loss to other expense, net, for declines in the
fair values of investments in equity securities below their cost bases
that were judged to be other-than-temporary. These equity securi-
ties were available to fund select benefit plan obligations.
2004
Gross Gross
Unrealized Unrealized Market
Cost Gains Losses Value
Equity securities $31.1 $4.4 $(1.4) $34.1
U.S. government bonds .8 – – .8
State and municipal bonds 11.3 .3 – 11.6
Mortgage backed securities 2.0 – – 2.0
Other 3.5 – (.3) 3.2
Total available-for-sale
securities 48.7 4.7 (1.7) 51.7
Grantor trust cash and
equivalents (Note 10) .3 – – .3
Total $49.0 $4.7 $(1.7) $52.0